U.S. credit card debt jumps 18.5% and hits a record $930.6 billion

[Hydrogen]

• Total credit card debt reached a record $930.6 billion in the fourth quarter of 2022, according to the latest credit report from TransUnion.
• As balance rise, so have delinquencies, which is “something to watch,” says TransUnion’s Michele Raneri.

For most Americans, inflation and rising interest rates are a one-two punch.

On the heels of another rate hike this week by the Federal Reserve, credit card annual percentage rates are already near 20%, on average, and set to climb even higher. At the same time, more consumers are leaning on credit to afford increasingly expensive necessities, like food and rent.

That helped propel total credit card debt to a record $930.6 billion at the end of 2022, a 18.5% spike from a year earlier, according to the latest quarterly report by TransUnion.

The average balance rose to $5,805 over that same period, TransUnion found.

At nearly 20%, if you made minimum payments toward this average credit card balance, it would take you more than 17 years to pay off the debt and cost you more than $8,213 in interest, Bankrate calculated.

“Whether it’s shopping for a new car or buying eggs in the grocery store, consumers continue to be impacted in ways big and small by both high inflation and the interest rate hikes implemented by the Federal Reserve,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion.

Overall, an additional 202 million new credit accounts were opened in the fourth quarter, led by originations among Generation Z, or adults ages 18 to 25, and the tally of total credit cards hit a record 518.4 million.

As the number of credit card accounts in the U.S. rises, more new customers are subprime borrowers, generally meaning those with a credit score of 600 or below, according to TransUnion, in part because of the flood of younger borrowers gaining access to credit cards.

But at the same time, delinquencies rose as lenders expand access to less-experienced credit users, the report found. TransUnion defines a delinquency as a payment that’s 60 days or more overdue.

“The increase in delinquencies is something to watch,” Raneri said. As long as unemployment stays down, households are better able to pay their bills, she noted. “If unemployment goes up, and we see a spike in delinquencies, then that indicates a longer-term problem.”

For now, the unemployment rate is at a 53-year low, after a better-than-expected January jobs report.

How to tackle high-interest credit card debt

“Cardholders do have options, though,” said Matt Schulz, chief credit analyst at LendingTree. Zero percent balance transfer credit card offers are even more plentiful than they were a year ago and remain one of the best weapons Americans have in the battle against credit card debt, he said.

Borrowers may also be able to refinance into a lower-interest personal loan. Those rates have climbed recently, as well, but at 10%, on average, are still well below what you currently have on your credit card, according to Schulz.

Otherwise, go back to the basics, advised Ted Rossman, senior industry analyst at Bankrate.

“Take on a side hustle, sell stuff you don’t need, cut your expenses,” he said. “A dollar saved is a dollar earned, and every dollar of credit card debt that you pay down has an average guaranteed, tax-free return of about 20%.”

https://www.cnbc.com/2023/02/03/us-credit-card-debt-jumps-18point5percent-and-hits-a-record-930point6-billion-.html

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Interesting stats:

The average balance rose to $5,805 over that same period, TransUnion found.

At nearly 20%, if you made minimum payments toward this average credit card balance, it would take you more than 17 years to pay off the debt and cost you more than $8,213 in interest, Bankrate calculated.

Overall, an additional 202 million new credit accounts were opened in the fourth quarter, led by originations among Generation Z, or adults ages 18 to 25, and the tally of total credit cards hit a record 518.4 million.

As the number of credit card accounts in the U.S. rises, more new customers are subprime borrowers, generally meaning those with a credit score of 600 or below, according to TransUnion, in part because of the flood of younger borrowers gaining access to credit cards.

But at the same time, delinquencies rose as lenders expand access to less-experienced credit users, the report found. TransUnion defines a delinquency as a payment that’s 60 days or more overdue.

“Cardholders do have options, though,” said Matt Schulz, chief credit analyst at LendingTree. Zero percent balance transfer credit card offers are even more plentiful than they were a year ago and remain one of the best weapons Americans have in the battle against credit card debt, he said.

There have been rumors of credit card debt ramping significantly for a span of months now.

Interest in finance, alt currencies, along with alternate payment options, also appear to be on the rise.

Our current economic and financial situation is one where many believed crypto currencies would emerge to the forefront and begin to shine.

Has that market sentiment changed or has it remained the same?

[Mauser]

Has that market sentiment changed or has it remained the same?

I don't think that the sentiment has changed much. The rise in credit card and other form of debt is due to the rising inflation. Inflation has grown by more than 10% since 2021. Food prices and energy cost has risen a lot lately and is felt by every family. When I compare the prices in my supermarket to last year I see some products jumped more than 30% in price. It's really hard to cut back on food and heating during winter. That is why so many people are using credit cards to try and cover their personal expenses. The main problem now is that credit card companies are increasing interest rates in line with the FED rate hikes. Repaying all that debt is going to be a big problem in the future.

[Gyfts]

https://tradingeconomics.com/united-states/debt-balance-credit-cards

What's interesting is that credit card debt rose from 2016-2020 at a high rate, and of course there are peaks of credit card debt in the 08 financial crisis as well.

I don't think that the sentiment has changed much. The rise in credit card and other form of debt is due to the rising inflation. Inflation has grown by more than 10% since 2021. Food prices and energy cost has risen a lot lately and is felt by every family. When I compare the prices in my supermarket to last year I see some products jumped more than 30% in price. It's really hard to cut back on food and heating during winter. That is why so many people are using credit cards to try and cover their personal expenses. The main problem now is that credit card companies are increasing interest rates in line with the FED rate hikes. Repaying all that debt is going to be a big problem in the future.

It's true that debt would rise if inflation is outpacing wage growth. But it's also a sign that the economy is probably on the downturn if people are relying on credit to pay their bills. This sort of debt is only sustainable if the economy would allow for people to pay off these debts. If there's a recession and people lose their income, all of a sudden this debt becomes a huge problem.

[Lucius]

I don't know how much that debt amounts to in the EU (if it is possible to determine it at all), but I know from personal experience that most people reach for credit cards and that this has become quite normal. I think that last year in my country, even the government intervened because the banks approved very high loans, without clearly informing the clients about the conditions, and this led many into debts that they could hardly pay back. As @Mauser wrote in his post, at a time when we have record high inflation, it is to be expected that people will reach for any possible help that is within their reach, no matter how much it costs them in the end.

Our current economic and financial situation is one where many believed crypto currencies would emerge to the forefront and begin to shine.

It's very easy to trick people into thinking that a bull run has started, whether it's Bitcoin or stocks, but somehow it doesn't seem to me that ordinary buyers have taken the bait this time. I read some analyzes about what possibly caused the positive changes in most markets at the beginning of this year, and some claim that big investors, mostly from the West, are responsible for it - considering that the jumps happened at a time when the Asian market was inactive.

On 31 January 2023, Woo told his one million Twitter followers:

“This recent rally coincides with a new pattern emerging of stablecoins flowing into exchanges during work days only. Seems to me like the heat signature of large institutions doing the buying.“ “Timing of the inflows spans approximately 16hrs, with the quiet zone being Asian work hours. This suggests it’s Western institutions across US and Europe.“

[Leviathan.007]

I don't know how much that debt amounts to in the EU (if it is possible to determine it at all), but I know from personal experience that most people reach for credit cards and that this has become quite normal. I think that last year in my country, even the government intervened because the banks approved very high loans, without clearly informing the clients about the conditions, and this led many into debts that they could hardly pay back. As @Mauser wrote in his post, at a time when we have record high inflation, it is to be expected that people will reach for any possible help that is within their reach, no matter how much it costs them in the end.

I don't have much information about the credit card debt amount in Europe either but I guess the situation is not better than US in Europe at least if you compare other years to this year in any country and any nation in the year the card dept amount eas really high compared to other years which can show us many things, for example, I think increasing the credit card debt amount indicate us how inflation rate is raising high while the salaries are still lower than it should be which is expecting if you consider the economic crisis we had.

[hugeblack]

About 1 trillion compared to more than 32 trillion. It seems that individuals are more careful with their money than the government, which seems very generous in debt.
The ratios seem reasonable, as inflation, wage stability, rising food prices, energy and the need for spending after life has returned to normal with supply chain problems will make there an increase in the lending rate even with high interest rates, given that you will repay the loan in the coming years and not sooner.

I do not know how the situation is in the United States, but some here are in debt because the profits that the banks will give him at the end of the year are greater than the amount of repayment if he deposits his money with them.